How To Handle A Stock Market Crash

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The media loves nothing better than a bit of drama, and if things are a bit dull there is nothing like a few emotive headlines using dramatic words like “Crash, Wipe Out, Massive Losses, and Melt Down” to create that drama, get hearts racing and newspapers sold.When stock markets take a downward turn like they have in the last few days, it’s a wonderful time for doom mongering and hype, and it’s no wonder investors can get rattled and uncertain about what they should do.

Even as a seasoned investor, having ridden the wave of four significant stock market corrections over the past 18 years and know that wealth success comes from riding it out, when bombarded with terrifying headlines, alerts and warnings it can take some focus to stay calm.

The first panicked instinct is to run like hell and get off the sinking ship with what ever you can. This means to sell everything. THIS IS ALWAYS A HUGE MISTAKE!!!!

Any valuation of investments you own at any point in time is just that – A VALUATION! When people tell me they have lost money because the stock market has gone down the first thing I ask them is whether they sold their investments at that particular valuation. If they say no, it’s just what the current value is, then I remind them that they have lost nothing. You still own the underlying companies that make up your investment. Nothing has actually changed and YOU ONLY LOSE IF YOU SELL!

So how do you hold your head while everyone else around you is losing theirs?

Firstly – change your language, take back your power and don’t get sucked into the drama. Remind yourself that nothing is crashing, nothing is sinking – the market is just currently riding the downward part of the waves that make up the investing world.

Secondly – realise that the downward correction on the stock market is actually a brilliant MEGA SALE!!!! You can snap up more units of your chosen Index tracker unit trust fund or EFT at a lower cost. As Warren Buffet so sagely suggests, to be successful in the stock market we should be “greedy when others are fearful and fearful when others are greedy”.

Thirdly – watch this video where I share with you what to do to turn these turbulent moments on the stock markets into times you get very excited about or at least don’t take any notice of.

Knowledge is the key – understand what is going on before you take any action.

I’d love to hear your thoughts on handling the emotions of stock market corrections and let me know what point from the video has helped you most.

Hi Alida
I am assuming the money is currently in a bank account in the USA. In order to open an investment account in the US you have to have an address in the US or be in one of about 15 countries which allow you to have an investment account in the USA. Unfortunately if your primary base is in South Africa you can’t open a USA online broker account. That doesn’t mean she can’t invest in the S&P500 though. You can invest in all international markets from South Africa via ETFs (Exchange Traded Funds) which track those markets. You can do this through the platform eftSA http://www.etfsa.co.za and just select an S&P500 ETF. Buy since the money is currently outside South Africa you daughter may want to keep it in forex and depending on the amount she could just keep it in the bank account and know that this is her safety net which is an important part of her financial freedom feast.

I hope you are right for your sake and that of your students. This is no normal market adjustments. This is just the beginning of the biggest bubble in history. It is going to be long and painful until maybe 2020. Oil may crash to $10 a barrel, Gold to $350 an ounce and Dow to 6000.

The great thing is Michael – me and my students understand that the important thing is to diversify – i.e not to have all your eggs in one basket, to manage money in various pots and have short term spending requirements help in low volatility environments. If what you say happens then I know I am in for a wonderful 4 years of stocking up my investment pots at a greatly discounted rate. In 2008 people retreated from investing in droves and stayed out of the market which was incredibly bad for their wealth because those of us who stayed invested and stuck with our regular investing received the benefit of significant growth as the markets climbed back up.

😉 Thanks for taking all the fear out of stock market investing. I love knowing that I can go to my account and withdraw a couple of years’ budget and leave the rest alone to keep on growing. Kind of a nice mindset not to have a All or Nothing life.

Michele – it doesn’t matter when you transfer between platforms or funds because as long as you sell and buy again at the same time it will still be at the same market level. The important thing is not to sell and then wait because then you run a big risk of the market moving up and you losing out.